Mortgages to be Thankful For

Thanksgiving means more than turkeys, sweet potatoes, and pumpkin pie. It’s the time to express gratitude for all the blessings in your life. Here are six things in the mortgage industry to be grateful for.

     1. Low mortgage rates. The news media says it on a daily basis – mortgage rates are the lowest that they’ve been in 50 years. Baby boomers, who were buying their first homes in the 1980s, remember double-digit mortgage rates, and know that current interest rates are the deal of a lifetime. Anyone who has good credit can refinance or buy a new home and be grateful for the opportunity to lock in an incredible deal at a fixed rate for 30 years.

     2. Second mortgages. Even though they were partially responsible for the mortgage meltdown by enabling homeowners to purchase homes with no money down, second mortgages are also serving as lifelines during this period of financial challenges. Second mortgages come in two forms – the fixed rate, fixed term home equity loan, and the adjustable-rate home equity line of credit (HELOC). The latter has served as an emergency fund for homeowners who needed quick cash during this period when banks have been tightening their lending standards.

     3. The Federal Housing Administration (FHA). This government agency provides mortgage insurance to lenders throughout the U.S., and enables borrowers who aren’t flush in cash or high in credit ratings to purchase homes.

     4.  Fannie Mae and Freddie Mac. The mission of these government-chartered agencies is to provide liquidity, stability, and affordability to the U.S. housing market. They buy loans from approved mortgage sellers, thus providing more cash for banks to continually fund mortgages.

     5.  The Veteran’s Administration (VA). Military members who have served the country receive help in becoming homeowners through the VA Loan program. Since these loans have less stringent standards than traditional mortgages, eligible veterans can buy a home with no money down, even if they wouldn’t qualify for a conventional mortgage.

     5.  Refinancing. Homeowners have the ability to restructure their debt, or take advantage of lower interest rates, through the process of a mortgage refinance. Although closing fees can be steep, they can be added to the mortgage balance. It’s such a powerful tool, that many homeowners are tempted to abuse the process by doing it over and over again. But if you’re careful, you can use it when you need it to manage your debt.

     6.  Prepayment. Many banks allow borrowers to prepay all or a part of their mortgage without financial penalty. This allows homeowners to either prepay their principal balance over the course off the loan, shaving thousands of dollars off their total interest paid, or take advantage of a mortgage refinance when interest rates are low.

This Thanksgiving, while you’re feasting with friends and family around a table flush with delicious edibles, take a minute to look at your environment. Don’t forget to give a huge thank you for the mortgage that’s helped keep the roof over the heads of your loved ones.